On July 1, 2019, Killearn Company acquired 99,000 of the outstanding shares of Shaun Company for $19 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investees decisions. As of July 1, 2019, the investee had assets with a book value of $6 million and liabilities of $329,600. At the time, Shaun held equipment appraised at $386,400 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1,220,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $595,000 in 2019, $626,600 in 2020, and $678,400 in 2021. In addition, Killearn sold inventory costing $142,800 to Shaun for $238,000 during 2020. Shaun resold $90,000 of this inventory during 2020 and the remaining $148,000 during 2021.

Required:

a. Determine the equity income to be recognized by Killearn during each of these years.

Equity income 2019:

Equity income 2020:

Equity income 2021:

b. Compute Killearns investment in Shaun Companys balance as of December 31, 2021.

Investment in Shaun: